Planet 13 Holdings (Planet 13 Holdings CSE:PLTH) plans to acquire a dispensary licence in California is getting the thumbs up from Beacon Securities analyst Doug Cooper, who is raising his target price, calling the new event an excellent strategic initiative for the Nevada-based cannabis company to expand its Superstore brand.
US cannabis play Planet 13 recently announced a letter of intent to acquire a cannabis license for a dispensary in Santa Ana, California, for $10 million including $6 million in cash and 2.04 million shares valued at $4 million. (All figures in US dollars unless noted otherwise.)
In a June 10 client update, Cooper outlines the reasons why he likes the deal. First, there’s the synergies between P13’s Las Vegas operation and the Southern California market; second, there’s the fact that California and Los Angeles itself represent the largest cannabis market in the world (and is under-represented at present, says Cooper); third, Santa Ana is in Orange County, which has a population of 3.2 million and is a destination location; and fourth, at 40,000 sq. ft., the size of the proposed facility in Santa Ana would allow for a repeat of the Superstore’s ongoing success.
“Aside from its ideal location, the size of the facility is such that P13 can replicate the user experience defined by its Las Vegas Superstore, which has a plus-12-per-cent market share in Clark County after such six months,” says Cooper.
“While it is too early to revise our FY20 estimates or initiate FY21, we do believe the shares should start to reflect its move into the largest cannabis market in the world,” he says.
For Planet 13, Cooper is calling for fiscal 2019 revenue and adjusted EBITDA of $82.1 million and $20.5 million. He is maintaining his “Buy” rating with the new target of C$8.50 (was C$7.25), which represented a projected return of 194 per cent at the time of publication.